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The reward for surviving Sandy may be higher taxes

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Modified: November 29, 2012 at 3:31 pm •
Published: November 29, 2012

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TOMS RIVER, N.J. (AP) — Superstorm Sandy may have one more nasty surprise still to come: higher taxes.

The math is simple and cruel. The storm left fewer properties standing, often wrecking waterfront communities that paid the highest taxes because of the desirability of living near the water.

FILE - This Oct. 31, 2012 file photo shows the destroyed homes left in the wake of superstorm Sandy in Seaside Heights, N.J. Superstorm Sandy may have one more nasty surprise still to come: higher taxes. Unless shore towns from Rhode Island to New Jersey get a big influx of aid from the state and federal governments, which are themselves strapped for cash, they will have no choice but to raise taxes on homes and businesses that survived to make up for the loss.(AP Photo/Mike Groll, file)

Unless shore towns from Rhode Island to New Jersey get a big influx of aid from the state and federal governments, which are themselves strapped for cash, they will have no choice but to raise taxes on homes and businesses that survived to make up for the loss. Even with federal reimbursement of 75 percent, the towns — many of which were already struggling before the storm — could still be on the hook for tens of millions of dollars.

"Hopefully taxes won't go up; we all have individual bills that we're going to have to worry about," said Ralph Isaacs, a 71-year-old retired teacher whose home in Long Beach, N.Y., was flooded with 18 inches of water, knocking out the electricity and heat and forcing him and his wife into a rented recreational vehicle for 17 days. "We're pretty sure the insurance money is not going to cover everything."

Toms River, where 5,000 residents are still out of their homes, recently passed a $35 million emergency appropriation; debris removal alone is costing it $1 million a week. The township's Ortley Beach section, where property values and taxes were highest, saw 225 homes destroyed. Administrator Paul Shives asked state officials this week for three to five years of extra state aid.

Right now, he said, it is impossible for towns like his to even consider formulating a budget without knowing how much tax money will be coming in. Shore towns especially are expecting a wave of tax appeals from storm-damaged or destroyed homes that will lower the towns' tax bases, though that doesn't appear to have begun in earnest yet.

The realities have touched off an intense push to get the federal government to assume the largest share of the cost. New York Gov. Andrew Cuomo this week upped his state's reimbursement request from $30 billion to $42 billion; New Jersey Gov. Chris Christie asked Wednesday for $36.8 billion; and Connecticut Gov. Dannel P. Malloy is asking for more than $3 billion.

All three governors are working together to get aid delivered, and Cuomo said most of the recovery should be paid for by the federal government.

"To try to finance (recovery costs) through taxes would incapacitate this state," said Cuomo, who noted the cost of repairing just one subway station in lower Manhattan will be $600 million.

Christie — who this week announced his campaign for a second term amid high poll ratings for his handling of the storm and who is considered a leading potential Republican presidential candidate in 2016 — has told residents in storm-damaged areas to expect to pay higher taxes. This month, he told communities they can exempt storm recovery costs from a state-imposed 2 percent limit on property tax increases.

"You know, it's got to be paid for," said Christie, whose constituents already pay among the highest property taxes in the nation. "There's no magic money tree. But I think most people's towns will recognize that if they believe that the money is being spent reasonably and responsibly to rebuild their towns, they'll be happy to do it."

"Every town up and down from Long Island, Staten Island to Long Beach Island is dealing with this," he said. "They're all going to face the same problem. If spending continues — and it has to — and the tax base goes down, you've got to make it up from somewhere. It's got to be paid for. It's definitely a concern."

With local towns reeling and state governments equally cash-strapped, many are looking to the federal government to make things right through the Federal Emergency Management Agency, the arm of government that has paid out billions in disaster recovery funds for Midwestern floods, tornadoes and Hurricane Katrina, among others.

But politically, Sandy couldn't have come at a worse time, with Republicans and Democrats locked in a bitter standoff over spending and taxes as a series of painful automatic tax increases and spending cuts known as the "fiscal cliff" looms if lawmakers can't agree on a deficit reduction plan. Lawmakers from states hit hard by Sandy are eager for the White House to make its emergency request to Congress for more Sandy money.

A new disaster aid funding plan was put in place by last year's budget agreement that permits President Barack Obama to seek another $5.4 billion in disaster aid — on top of $7.1 billion approved as part of a six-month government funding bill — without breaking budget limits. Lawmakers are eager to at least obtain the $5.4 billion during Congress' lame duck session. It's more likely any additional funds would come next year.

There's also a possibility that more Sandy funding could get wrapped into a broader budget deal as part of the fiscal cliff talks.

On Wednesday, FEMA approved $8.3 million in debris removal funding for four New Jersey municipalities, and New Jersey's state government got $31.1 million for feeding and housing rescue and utility workers after the storm.

On New York's Long Island, Long Beach City Manager Jack Schnirman said the community already took steps this year to reduce a $10.25 million deficit from its $87 million annual budget. The city workforce was cut by 10 percent, including five firefighters from a 35-member force. The city also imposed a three-year tax surcharge on all homeowners to close the deficit.

That puts the city in no position to ask taxpayers to cover the costs of Sandy, which he estimated at $200 million. Moody's Investor Service says after FEMA reimbursements, the city could be left with a bill of as much as $25 million. Schnirman said he is still seeking ways for other federal or state money to cover that cost.

"We can't go back to our taxpayers," he said. "That's not a viable option."

Municipal governments are already doing the calculations — and not liking the answers. On the eastern half of Long Island, Suffolk County officials say Sandy has cost an estimated $70 million for debris removal and beach and road repairs, as well as police overtime. A county official estimated that after FEMA reimbursements, the county could be on the hook for $50 million but didn't anticipate having to raise taxes.

Westerly was the Rhode Island town hardest hit by the storm. Town Manager Steven Hartford said it has already paid $400,000 for storm-related repairs and sand removal; the total cost is likely to reach $3.5 million before FEMA reimbursements.

"If we spend between $3 million and $4 million, even if we hit a grand slam and get 75 percent of that reimbursed, we're still out a million dollars," Hartford said.

Likewise, in Point Pleasant Beach, N.J., Mayor Vincent Barrella is bracing for a higher tax rate in a town that has already approved $2.4 million for emergency cleanup. It approved more than $1 million in spending this week for boardwalk repairs, sand removal, replacing police cars destroyed in the storm, a front-end loader and other Sandy-related costs.

"This is stuff you have to do," Barrella said. "You have to haul away the debris, you have to pick up the downed trees; you can't just leave the sand in the middle of the street."

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Contributing to this report were Associated Press writers Frank Eltman in Long Beach, N.Y., Andrew Miga in Washington, D.C., and David Klepper in Westerly, R.I.